Coverage of Westwater Resources, Inc. (WWR) has been updated following report of financial performance in the quarter ending September 2018. Recent events in each of Westwater’s target markets demonstrate the large and growing market opportunities that have been a central part of our investment thesis in Westwater, continue to develop unabated. Perhaps more importantly the Company’s quarter report confirmed management has made progress in each segment: uranium, lithium and graphite.
- Unceremoniously stripped of its Turkey uranium assets, the Company is now more reliant on its mothballed Texas properties. However, management has remained on top of maintenance and can put the assets back into play if and when uranium selling prices reach the Company’s marginal costs in the low 40s.
- Development of lithium assets in Utah and Nevada has moved forward with exploration permit applications and water rights applications pending.
- Westwater personnel continue to work with at least two dozen prospective customers that are testing the Company’s Purified Micronized Graphite (PMG) The Company is on schedule with plans for a pilot plant that would be capable of low-volume production of PMG before the end of 2019.
Our view of Westwater Resources shares as undervalued is unchanged. The stock continues to trade at multiples of assets and book value well below its peers in the energy materials universe. The Company is currently valued at half of the Company’s book value, suggesting investors are giving management little credit for their accomplishments and show even less confidence in management’s ability to capitalize on the value of the Company’s assets.
In our view, this is an unreasonably pessimistic position given recent developments that lead the way to revenue and earnings generation. First, demand conditions in the nuclear power market suggest it may be possible to resume production at the Company’s proven uranium assets in Texas within the next two to three years. Second, management has successfully moved forward with exploration of its lithium assets in Nevada and Utah, putting Westwater in a good position to participate in the large and growing market for lithium ion batteries. Third, customer interest remains strong in Westwater’s planned battery-grade graphite materials and the Company has moved ahead with plans for a pilot plant for low-volume production.
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